In early March, Kevin Junker’s renewable energy startup, SmartSolar, which installs and manages rooftop panels for its clients, announced it had secured $1.85 million in its first round of venture capital fundraising, giving the Ho Chi Minh City-based firm a chance to tap into Vietnam’s rapidly growing demand for clean energy.

The funds will go toward ramping up the company’s operations as much as tenfold by the end of the year. While that may sound like a lot, it’s only a start. Taken together, SmartSolar’s entire power output would satisfy 70 median Vietnamese households for a month.

But when it comes time for SmartSolar to expand, say to a new city, or take on a big new client, its options may be more limited. U.S. cuts to development aid, including support for clean energy, could make it tougher for the company to attract more risk-averse investors.

Last year Junker approached the U.S. International Development Finance Corporation (DFC), which he said indicated to him it invests as much as $100 million a year in renewable projects. Other government development funds include Norway’s Norfund, British International Investment, and Germany’s GIZ.

The DFC may no longer be an option because it is being reorganized to promote investments in energy, infrastructure and technology that can counter China’s Belt and Road Initiative, according to a media report. In late January, the U.S. abruptly halted funding from USAID, the federal agency administering foreign aid and development assistance.

“The U.S. is one player. It’s not the only one. But maybe I had seven players and then now I only have six,” Junker told Mongabay.

“I think that impact will be felt [by startups] in the later stages [of funding] when it comes to needing bigger sums.”

One example: last July, Jakarta-based Xurya Daya Indonesia, which also installs and manages solar panels for factories or office buildings, raised $55 million from Norwegian, Swedish and U.K. overseas development funds — more than doubling the capital the company had raised since it first opened its doors in 2018.

That was then. Now, amid geopolitical jitters and as governments in the U.S. and in parts of Asia are seeming to back away from supporting renewables, the investment climate for clean-energy startups may be facing a reversal of fortune.

Jakarta-based Swap Energi, which sells electric motorcycles with swappable batteries, has notched up sales of about 2,000 vehicles since the start of the year. That’s compared with 7,000 over a given three-month period last year when the Indonesian government was offering subsidies of 7 million rupiah ($423) each to support the sales of new electric motorcycles.

In early February, Indonesia’s coordinating minister for economic affairs, Airlangga Hartarto, said the subsidy, which ended in December, would be renewed this year.

Since then, though, Indonesian President Prabowo Subianto has slashed nearly 9% of the country’s budget, including for transport infrastructure, in part to help pay for public housing and a free lunch program for schoolchildren, which, when fully operational at the end of the decade, will cost $29 billion.

In February, Bank Indonesia said it would buy 130 trillion rupiah ($7.7 billion) in government bonds, effectively printing money, to help pay for a subsidized housing program, a Prabowo campaign promise.

In response, the rupiah has fallen to nearly its lowest level since the Asian financial crisis of the late 1990s, on worries of slower growth and rising prices. The prospect of U.S. tariffs on Indonesia’s exports of machinery and electronics, garments and footwear — Indonesia’s top shipments to the U.S. — adds to the macroeconomic headaches.

Swap Energi co-founder Kevin Phang told Mongabay that Indonesia’s spending plans may not leave much fiscal room for EV subsidies.

“The government is focused on food or houses,” Phang said.

“We heard there will be subsidies, but when or how I don’t know.”

For its part, Swap Energi secured $22 million in venture funding in early 2024. Renewable-energy startups face an uphill battle for attention and funding, vying for investor attention with artificial intelligence and fintech — software and other technology that enable banking and financial services — amid high interest rates. Funders demand companies avoid burning through cash for promos, say, and turn a profit quickly, often within a year, Phang said, adding that Swap is in the black.

Economic uncertainty in the U.S., owing to the onslaught of tariffs and a general hardening of attitudes toward renewables on the part of the new U.S. administration, has made it tougher for venture capital funds to raise money from their limited partners — the investors who contribute money to venture capital funds to hunt for startups on their behalf, Phang said.

“Energy transition right now is a little bit confusing because the U.S. is not going electric anymore,” Phang said.

In fact, the general climate for startups of all stripes is cooling in Southeast Asia, slumping by 40% to $4.6 billion last year, according to DealStreetAsia’s Data Vantage report last month.

Swap Energi focuses on delivery and ride-hailing drivers who operate long distances within defined geographies with recharging packages that include unlimited swaps for 25,000 rupiah ($1.50) a day — an estimated savings of at least 40,000 rupiah ($2.40) and allowing users to travel distances of up to 150 kilometers (93 miles) per day, compared with drivers on conventional bikes.

Junker, a Swiss native and Cambridge graduate, explains that backing from government-linked agencies like Norfund can be a vote of confidence in the eyes of investors and can open doors for the company to regulators and suppliers.

SmartSolar is in the early stages of developing a balcony solar panel business with the help of GIZ, Germany’s international development agency. The agency is putting the company in touch with local government officials to help develop the business while promoting the country’s own exports.

“ It helps distribute knowledge and feasibility studies in these kinds of countries,” Junker said, referring to the help GIZ is offering.

“And, actually, at the end of day, they often use their own products.”

Vietnam’s demand for electricity is expected to balloon by as much as 14% this year. The government is embracing renewables as a sort of all-of-the-above strategy that can meet the country’s needs without taxing its grid, Junker said.

The company’s balcony solar business, while still in the planning stages, would likely center on a one-off sale of equipment, including the panels, rather than lease and maintain them like SmartSolar currently offers to corporate clients.

The business will need to promote itself to users as a means of cutting electricity costs by generating and using their own power rather than hoping to sell any excess onto the grid — an arrangement requiring upgrades that can cope with the intermittency of solar energy, Junker said.

“We should be thinking about how people can produce the electricity themselves and use it themselves,” Junker said.

“ We need to think of what we can do that works in line with the government rules and do this without just adding billions of dollars of cost on all these national providers.”

Banner image: Solar panels in Bali, Indonesia. Image by Selamat Made via Flickr (CC BY 2.0).

Investors wary of Indonesia’s big climate promises amid record of flip-flopping